Brazil: 10 good reasons to think the two-month-old government will go

February 27, 2015

Jonathan Wheatley – Financial Times, 2/25/2015

So much is going wrong in Brazil that it is hard to keep up. For years, critics have accused the government of incompetence. Now its actions are looking catastrophic – so much so that there are good reasons to think President Dilma Rousseff, who began a second four-year term only on January 1, may not last much longer.

Here is our list of 10 things that threaten to bring her down.

1. Politics.
For a Brazilian president to be impeached, they must do something egregiously wrong. But many do that and survive. What really counts is losing support in Congress. Rousseff’s congressional majority was cut at the election while the number of parties in Congress increased, leaving her coalition more splintered and harder to control. Worse, large sections of her ruling Workers’ Party have turned against her. Some members regard her as a late-coming, opportunistic interloper. Some to the “right” of the party accuse her of messing up. Others to the left are furious at her appointment of the “neo-liberal” Joaquim Levy as finance minister last month.

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Brazil: In a quagmire

February 27, 2015

The Economist (print edition), 2/28/2015

CAMPAIGNING for a second term as Brazil’s president in an election last October, Dilma Rousseff painted a rosy picture of the world’s seventh-biggest economy. Full employment, rising wages and social benefits were threatened only by the nefarious neoliberal plans of her opponents, she claimed. Just two months into her new term, Brazilians are realising that they were sold a false prospectus.

Brazil’s economy is in a mess, with far bigger problems than the government will admit or investors seem to register. The torpid stagnation into which it fell in 2013 is becoming a full-blown—and probably prolonged—recession, as high inflation squeezes wages and consumers’ debt payments rise (see article). Investment, already down by 8% from a year ago, could fall much further. A vast corruption scandal at Petrobras, the state-controlled oil giant, has ensnared several of the country’s biggest construction firms and paralysed capital spending in swathes of the economy, at least until the prosecutors and auditors have done their work. The real has fallen by 30% against the dollar since May 2013: a necessary shift, but one that adds to the burden of the $40 billion in foreign debt owed by Brazilian companies that falls due this year.

Escaping this quagmire would be hard even with strong political leadership. Ms Rousseff, however, is weak. She won the election by the narrowest of margins. Already, her political base is crumbling. According to Datafolha, a pollster, her approval rating fell from 42% in December to 23% this month. She has been hurt both by the deteriorating economy and by the Petrobras scandal, which involves allegations of kickbacks of at least $1 billion, funnelled to politicians in her Workers’ Party (PT) and its coalition partners. For much of the relevant period Ms Rousseff chaired Petrobras’s board. If Brazil is to salvage some benefits from her second term, then she needs to take the country in an entirely new direction.

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Petrobras scandal about to hit Brazil’s political class

February 26, 2015

Anthony Boadle – Reuters, 2/25/2015

Brazil’s top prosecutor is expected to file charges in coming days against politicians implicated in the Petrobras corruption scandal, a political bombshell that could involve members of Congress and President Dilma Rousseff’s government.

Under Brazilian law, lawmakers and cabinet members can only be tried by the Supreme Court. Prosecutor Rodrigo Janot has said he plans to file cases with the court by the end of the month against politicians involved in the graft scheme at Petrobras.

Prosecutors say corrupt executives from Petroleo Brasileiro SA (PETR4.SA), as the company is formally known, conspired with contractors to misappropriate billions of dollars from the company. Some of the funds were funneled to politicians and political parties, the prosecutors say.

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Insight: Brazilian companies push for deal to minimize Petrobras scandal

February 23, 2015

Brian Winter – Reuters, 02/20/2014

Some of the companies caught up in a massive corruption scandal at state-run oil firm Petrobras are quietly pressing Brazil’s government and judiciary to strike a “grand bargain” to minimize the legal fallout, five sources with knowledge of the talks say.

The companies, which prosecutors suspect of paying out billions of dollars in bribes through service contracts they had with Petrobras, are worried the investigation is too far-reaching and could drag on for years, heavily damaging their bottom lines and Brazil’s fragile economy.

They are not trying to escape punishment altogether but are pressing judges and officials in President Dilma Rousseff’s government, sometimes through intermediaries or at informal meetings, to find a way for any penalties to be definitive and applied quickly, the sources told Reuters.

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Amid Division and Paralysis, an Isolated Rousseff Confronts Scandal and Her Own Troubled Legacy

February 12, 2015

Paulo Sotero – The Huffington Post, 2/12/2015

Millions of Brazilians will sing and dance in the streets in the pre-lent festival of Carnaval starting this weekend. This year, however, there is no way to escape the harsh realities of a government paralyzed by division, scandals, and an economy on the verge of recession. The sharp increase of the inflation rate to 1.24 percent in the month of January, or 7.14 percent in the past 12 months — well above the Central Bank’s target limit of 6.5 percent — did not come as a surprise to Brazilians. According to a new survey, 86 percent of them believe prices will keep rising in 2015 as the government puts in place an austerity strategy described by President Dilma Rousseff in the first cabinet meeting of her recently inaugurated second term as “corrective” and “indispensable” to restore the country’s financial health. The expectation of continued price hikes will complicate the task of the team led by Finance Minister Joaquim Levy to stabilize the economy and restore confidence among Brazilian and foreign investors in the country’s capacity to resume sustainable growth in the years ahead. Some 90 percent of those surveyed said they expect salaries not to keep up with inflation, which implies rising social tension and trouble ahead within the government coalition led by the Workers’ Party (PT).

Brazilians’ overall perception of the economy has turned sharply negative, according to a telephone survey called Radar Ideia Popular conducted by Ideia Inteligência, with a sample of 78,222 people in 259 cities in all regions of the country from January 26 to February 1. Three quarters expect employment levels to worsen during the year in comparison with 2014, when record low unemployment served as a powerful campaign argument by President Rousseff. The negative perception on employment trends is more pronounced in the Southeastern states, Brazil’s economic powerhouse and home to the bulk of political opposition to the president, who won reelection last October by a narrow 3 percent margin: 81 percent expect the situation to get worse and only 15 percent said it will get better. A slightly more optimistic view prevails in the pro-government Northeastern region, where 30 percent see a rosier picture on employment, compared to 68 percent who are pessimistic. Nationally, there is strong pessimism on employment among the young, with two thirds of them expecting the job situation to deteriorate.

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The president of Brazil is already having the worst year ever

February 12, 2015

Linette Lopez – Business Insider, 2/11/2015

Dilma Rousseff is having a rough 2015.

The Brazilian president, who barely defended her seat from opposition candidate Aecio Neves last fall, is dangerously close to losing it. The calls for her impeachment have gotten too loud to ignore. Eurasia Group researchers estimate that there’s a 20% chance she’ll be removed from office.

And as the situation gets worse, the odds of that happening increase. Rousseff’s latest missteps have to do with a singular problem — Petrobras. The state-owned oil company that short seller Jim Chanos called “a scheme not a stock” has turned into a $40 billion market-cap nightmare for the country. Laden with debt, inefficient and corrupt, it seems like new revelations about the dirty connection between the company and Rousseff’s party come out every day. Brazilians are tired.

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Brazil’s Rousseff under pressure but impeachment seen unlikely

February 10, 2015

Anthony Boadle – Reuters, 1/10/2015

For the first time since a corruption scandal erupted at Brazil’s state-run oil company Petrobras last year, senior opposition politicians are publicly floating the possibility of impeaching President Dilma Rousseff.

She does not face an immediate risk of impeachment, leading opponents told Reuters, but that could change if prosecutors find evidence that Rousseff knew of or benefited from the massive graft scheme.

Prosecutors say executives at Petroleo Brasileiro SA (PETR4.SA), as Petrobras is formally known, conspired with contractors to skim billions of dollars for themselves and political parties when Rousseff was the company’s chairwoman from 2003 to 2010.

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